United StatesUNITED STATESSecurities and Exchange CommissionSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2005.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For the transition period from _______________ to _______________.
Commission File Number 1-7978
Black Hills Power, Inc.
Incorporated in South Dakota IRS Identification Number 46-0111677
625 Ninth Street
Rapid City, South Dakota 57701
Registrant’s telephone number (605) 721-1700
Former name, former address, and former fiscal year if changed since last report
NONE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
As of July 29,October 31, 2005, there were issued and outstanding 23,416,396 shares of the Registrant’s common stock, $1.00 par value, all of which were held beneficially and of record by Black Hills Corporation.
The Registrant meets the conditions set forth in General Instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format.
Page | ||||||||
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PART I. | FINANCIAL INFORMATION | |||||||
Item 1. | Financial Statements | |||||||
Condensed Statements of Income - | ||||||||
Three and | 3 | |||||||
Condensed Balance Sheets - | ||||||||
| 4 | |||||||
Condensed Statements of Cash Flows - | ||||||||
| 5 | |||||||
Notes to Condensed Financial Statements | ||||||||
Item 2. | Results of Operations | |||||||
Item 4. | Controls and Procedures | |||||||
PART II. | OTHER INFORMATION | |||||||
Item 1. | Legal Proceedings | |||||||
Item 6. | Exhibits | |||||||
Signatures | ||||||||
Exhibit Index |
2
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||
Operating revenue | $ | 42,261 | $ | 39,809 | $ | 85,408 | $ | 81,456 | $ | 49,274 | $ | 47,921 | $ | 134,682 | $ | 129,377 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Fuel and purchased power | 15,587 | 14,383 | 30,794 | 27,193 | 24,495 | 18,506 | 55,289 | 45,698 | ||||||||||||||||||||
Operations and maintenance | 6,613 | 7,817 | 11,970 | 13,997 | 5,277 | 5,993 | 17,247 | 19,991 | ||||||||||||||||||||
Administrative and general | 5,062 | 4,110 | 11,022 | 8,188 | 7,026 | 4,533 | 18,048 | 12,721 | ||||||||||||||||||||
Depreciation and amortization | 4,759 | 4,803 | 9,697 | 9,746 | 4,905 | 4,703 | 14,602 | 14,448 | ||||||||||||||||||||
Taxes, other than income taxes | 2,120 | 2,136 | 4,310 | 4,364 | 2,108 | 1,680 | 6,417 | 6,044 | ||||||||||||||||||||
34,141 | 33,249 | 67,793 | 63,488 | 43,811 | 35,415 | 111,603 | 98,902 | |||||||||||||||||||||
Operating income | 8,120 | 6,560 | 17,615 | 17,968 | 5,463 | 12,506 | 23,079 | 30,475 | ||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||
Interest expense | (3,146 | ) | (4,218 | ) | (6,361 | ) | (8,406 | ) | (3,122 | ) | (4,138 | ) | (9,483 | ) | (12,545 | ) | ||||||||||||
Interest income | 9 | 226 | 43 | 438 | 2 | 232 | 45 | 671 | ||||||||||||||||||||
Other income, net | 134 | 42 | 275 | 141 | 30 | 42 | 303 | 181 | ||||||||||||||||||||
(3,003 | ) | (3,950 | ) | (6,043 | ) | (7,827 | ) | (3,090 | ) | (3,864 | ) | (9,135 | ) | (11,693 | ) | |||||||||||||
Income before income taxes | 5,117 | 2,610 | 11,572 | 10,141 | 2,373 | 8,642 | 13,944 | 18,782 | ||||||||||||||||||||
Income taxes | (1,708 | ) | (794 | ) | (3,840 | ) | (3,289 | ) | (485 | ) | (2,782 | ) | (4,325 | ) | (6,070 | ) | ||||||||||||
Net income | $ | 3,409 | $ | 1,816 | $ | 7,732 | $ | 6,852 | $ | 1,888 | $ | 5,860 | $ | 9,619 | $ | 12,712 | ||||||||||||
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
3
June 30 | December 31 | September 30, | December 31, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2005 | 2004 | 2005 | 2004 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 6 | $ | 344 | $ | 2,895 | $ | 344 | ||||||||
Restricted cash | -- | 3,069 | -- | 3,069 | ||||||||||||
Receivables (net of allowance for doubtful accounts of $907 and $912, respectively) | 15,630 | 18,497 | ||||||||||||||
Receivables (net of allowance for doubtful accounts of $875 and $912, respectively) | 18,400 | 18,497 | ||||||||||||||
Receivables - affiliate | 1,173 | 891 | 2,006 | 891 | ||||||||||||
Materials, supplies and fuel | 12,944 | 11,513 | 14,518 | 11,513 | ||||||||||||
Deferred income taxes | 686 | -- | 805 | -- | ||||||||||||
Derivative assets | -- | 30 | ||||||||||||||
Other current assets | 1,099 | 2,346 | 61 | 2,316 | ||||||||||||
31,538 | 36,660 | 38,685 | 36,660 | |||||||||||||
Investments | 3,283 | 3,275 | 3,299 | 3,275 | ||||||||||||
Property, plant and equipment | 645,027 | 637,630 | 649,916 | 637,630 | ||||||||||||
Less accumulated depreciation | (242,246 | ) | (232,401 | ) | (246,279 | ) | (232,401 | ) | ||||||||
402,781 | 405,229 | 403,637 | 405,229 | |||||||||||||
Other assets: | ||||||||||||||||
Regulatory assets | 7,144 | 7,237 | 6,987 | 7,237 | ||||||||||||
Other | 13,002 | 13,204 | 11,342 | 13,204 | ||||||||||||
20,146 | 20,441 | 18,329 | 20,441 | |||||||||||||
$ | 457,748 | $ | 465,605 | $ | 463,950 | $ | 465,605 | |||||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current maturities of long-term debt | $ | 1,993 | $ | 1,991 | $ | 1,994 | $ | 1,991 | ||||||||
Accounts payable | 7,080 | 7,551 | 6,786 | 7,551 | ||||||||||||
Accounts payable - affiliate | 485 | 331 | 3,477 | 331 | ||||||||||||
Note payable - affiliate | 10,724 | 25,074 | 11,860 | 25,074 | ||||||||||||
Derivative liabilities | 1,246 | -- | ||||||||||||||
Accrued liabilities | 13,534 | 13,816 | 13,815 | 13,816 | ||||||||||||
33,816 | 48,763 | 39,178 | 48,763 | |||||||||||||
Long-term debt, net of current maturities | 155,240 | 157,215 | 155,230 | 157,215 | ||||||||||||
Deferred credits and other liabilities: | ||||||||||||||||
Deferred income taxes | 70,149 | 69,233 | 68,927 | 69,233 | ||||||||||||
Regulatory liabilities | 5,888 | 6,021 | 5,819 | 6,021 | ||||||||||||
Other | 14,124 | 13,537 | 14,803 | 13,537 | ||||||||||||
90,161 | 88,791 | 89,549 | 88,791 | |||||||||||||
Stockholder's equity: | ||||||||||||||||
Common stock $1 par value; 50,000,000 shares authorized; 23,416,396 shares issued | 23,416 | 23,416 | 23,416 | 23,416 | ||||||||||||
Additional paid-in capital | 39,549 | 39,549 | 39,549 | 39,549 | ||||||||||||
Retained earnings | 117,039 | 109,307 | 118,926 | 109,307 | ||||||||||||
Accumulated other comprehensive loss | (1,473 | ) | (1,436 | ) | (1,898 | ) | (1,436 | ) | ||||||||
178,531 | 170,836 | 179,993 | 170,836 | |||||||||||||
$ | 457,748 | $ | 465,605 | $ | 463,950 | $ | 465,605 | |||||||||
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
4
Six Months Ended | Nine Months Ended | |||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Operating activities: | ||||||||||||||||
Net income | $ | 7,732 | $ | 6,852 | $ | 9,619 | $ | 12,712 | ||||||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 9,697 | 9,746 | 14,602 | 14,448 | ||||||||||||
Deferred income tax | 230 | 897 | (1,224 | ) | 793 | |||||||||||
Net change in derivative assets and liabilities | 78 | -- | ||||||||||||||
Change in operating assets and liabilities - | ||||||||||||||||
Accounts receivable and other current assets | 2,406 | 3,296 | (1,244 | ) | 3,961 | |||||||||||
Accounts payable and other current liabilities | (599 | ) | (7,149 | ) | 2,380 | (9,991 | ) | |||||||||
Other operating activities | 707 | 1,672 | 3,501 | 1,734 | ||||||||||||
20,173 | 15,314 | 27,712 | 23,657 | |||||||||||||
Investing activities: | ||||||||||||||||
Property, plant and equipment additions | (7,249 | ) | (5,903 | ) | (13,010 | ) | (10,426 | ) | ||||||||
Change in notes receivable from associated companies, net | -- | 4,665 | -- | 12,334 | ||||||||||||
Change in investments and restricted cash | 3,061 | (264 | ) | 3,045 | (181 | ) | ||||||||||
(4,188 | ) | (1,502 | ) | (9,965 | ) | 1,727 | ||||||||||
Financing activities: | ||||||||||||||||
Changes in notes payable to associated companies, net | (14,350 | ) | -- | (13,214 | ) | -- | ||||||||||
Dividends paid | -- | (12,000 | ) | -- | (18,000 | ) | ||||||||||
Long-term debt - repayments | (1,973 | ) | (1,971 | ) | (1,982 | ) | (7,829 | ) | ||||||||
(16,323 | ) | (13,971 | ) | (15,196 | ) | (25,829 | ) | |||||||||
Decrease in cash and cash equivalents | (338 | ) | (159 | ) | ||||||||||||
Increase (decrease) in cash and cash equivalents | 2,551 | (445 | ) | |||||||||||||
Cash and cash equivalents: | ||||||||||||||||
Beginning of period | 344 | 1,052 | 344 | 1,052 | ||||||||||||
End of period | $ | 6 | $ | 893 | $ | 2,895 | $ | 607 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid (received) during the period for: | ||||||||||||||||
Interest | $ | 7,508 | $ | 8,349 | $ | 9,973 | $ | 14,745 | ||||||||
Income taxes paid (refunded) | $ | 3,283 | $ | (3,111 | ) | $ | 2,122 | $ | (3,111 | ) |
The accompanying notes to condensed financial statements are an integral part of these condensed financial statements.
5
BLACK HILLS POWER, INC.
Notes to Condensed Financial Statements
(unaudited)
(Reference is made to Notes to Financial Statements
included in the Company’s 2004 Annual Report on Form 10-K)
(1) | MANAGEMENT’S STATEMENT |
The financial statements included herein have been prepared by Black Hills Power, Inc. (the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the footnotes adequately disclose the information presented. These financial statements should be read in conjunction with the financial statements and the notes thereto, included in the Company’s 2004 Annual Report on Form 10-K filed with the Securities and Exchange Commission. |
Accounting methods historically employed require certain estimates as of interim dates. The information furnished in the accompanying financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the |
(2) | COMPREHENSIVE INCOME |
The following table presents the components of the Company’s comprehensive income (in thousands): |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
Net income | $ | 3,409 | $ | 1,816 | $ | 7,732 | $ | 6,852 | $ | 1,888 | $ | 5,860 | $ | 9,619 | $ | 12,712 | ||||||||||||
Other comprehensive income, net of tax: | ||||||||||||||||||||||||||||
Fair value adjustment on derivatives designated | ||||||||||||||||||||||||||||
as cash flow hedges | (59 | ) | -- | (59 | ) | -- | (435 | ) | -- | (494 | ) | -- | ||||||||||||||||
Reclassification adjustment on interest rate | ||||||||||||||||||||||||||||
swap included in net income | 11 | 11 | 22 | 21 | 11 | 10 | 33 | 31 | ||||||||||||||||||||
Comprehensive income | $ | 3,361 | $ | 1,827 | $ | 7,695 | $ | 6,873 | $ | 1,464 | $ | 5,870 | $ | 9,158 | $ | 12,743 | ||||||||||||
6
(3) | RELATED-PARTY TRANSACTIONS |
Accounts Receivables/Accounts Payables |
The Company has accounts receivable and accounts payable balances related to transactions with other Black Hills Corporation subsidiaries. The accounts receivable balances were |
Notes Payable |
The Company |
In August 2005, the Company entered into a Utility Money Pool Agreement with the Parent, a registered holding company; and Cheyenne Light, Fuel & Power, an electric and gas utility subsidiary of the Parent. |
Under the agreement, the Utility may borrow from the Parent. The Agreement restricts the Company from loaning funds to the Parent or to any of the Parent’s non-utility subsidiaries; the Agreement does not restrict the Company from making dividends to the Parent. Borrowings under the Agreement bear interest at the daily cost of external funds as defined under the Agreement, or if there are no external funds outstanding on that date, then the rate will be the daily one-month LIBOR rate plus 100 basis points. Borrowings under the agreement are due upon demand. |
Other Balances and Transactions |
The Company received revenues of approximately |
The Company also pays the Parent for allocated corporate support service cost incurred on its behalf. Corporate costs allocated from the Parent were $3.2 million and $2.2 million for the three months ended September 30, 2005 and 2004, respectively; and $8.0 million and $6.7 million for the nine months ended September 30, 2005 and 2004, respectively. |
7
(4) | RISK MANAGEMENT |
On September 30, 2005, the Company had the following swaps and related balances (in thousands): |
Notional* | Maximum Terms in Years | Current Derivative Assets | Non-current Derivative Assets | Current Derivative Liabilities | Non-current Derivative Liabilities | Pre-tax Accumulated Other Comprehensive Income (Loss) | Unrealized Gain (Loss) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
September 30, 2005 | ||||||||||||||||||||||||||
Natural gas swaps | 425,000 | 0.50 | $ — | $ — | $ | 1,246 | $ — | $ | (759 | ) | $ | (487 | ) | |||||||||||||
_________________
*gas in MMbtu’s
Based on September 30, 2005 market prices, a $0.8 million loss would be realized and reported in pre-tax earnings during the next twelve months related to the cash flow hedge. These estimated realized losses for the next twelve months were calculated using September 30, 2005 market prices. Estimated and actual realized losses will likely change during the next twelve months as market prices change. |
In addition, certain volumes of natural gas inventory have been designated as the underlying hedged item in a “fair value” hedge transaction. These volumes are stated at market value using published spot industry quotations. Market adjustments are recorded in inventory on the Balance Sheet and the related unrealized gain/loss on the Statement of Income. As of September 30, 2005, the market adjustments recorded in inventory were $0.5 million. |
(5) | LONG TERM DEBT |
EMPLOYEE BENEFIT PLANS |
Defined Benefit Pension Plan |
The Company has a noncontributory defined benefit pension plan (Plan) covering the employees of the Company who meet certain eligibility requirements. |
The components of net periodic benefit cost for the Plan are as follows (in thousands): |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
Service cost | $ | 248 | $ | 240 | $ | 496 | $ | 480 | $ | 248 | $ | 240 | $ | 744 | $ | 720 | ||||||||||||
Interest cost | 675 | 655 | 1,350 | 1,310 | 675 | 655 | 2,025 | 1,965 | ||||||||||||||||||||
Expected return on plan assets | (870 | ) | (855 | ) | (1,740 | ) | (1,710 | ) | (870 | ) | (855 | ) | (2,610 | ) | (2,565 | ) | ||||||||||||
Amortization of prior service cost | 39 | 41 | 78 | 82 | 39 | 41 | 117 | 123 | ||||||||||||||||||||
Amortization of net loss | 213 | 270 | 426 | 540 | 213 | 270 | 639 | 810 | ||||||||||||||||||||
Net periodic benefit cost | $ | 305 | $ | 351 | $ | 610 | $ | 702 | $ | 305 | $ | 351 | $ | 915 | $ | 1,053 | ||||||||||||
8
The Company does not anticipate that it will need to make a contribution to the Plan in the 2005 fiscal year. |
7
Supplemental Nonqualified Defined Benefit Plan |
The Company has various supplemental retirement plans for outside directors and key executives of the Company (Supplemental Plans). The Supplemental Plans are nonqualified defined benefit plans. |
The components of net periodic benefit cost for the Supplemental Plans are as follows (in thousands): |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
Service cost | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||||||
Interest cost | 27 | 27 | 54 | 54 | 27 | 27 | 81 | 81 | ||||||||||||||||||||
Amortization of net loss | 12 | 13 | 24 | 26 | 12 | 13 | 36 | 39 | ||||||||||||||||||||
Net periodic benefit cost | $ | 39 | $ | 40 | $ | 78 | $ | 80 | $ | 39 | $ | 40 | $ | 117 | $ | 120 | ||||||||||||
The Company anticipates that it will need to make contributions to the Supplemental Plans for the 2005 fiscal year of approximately $0.1 million. The contributions are expected to be in the form of benefit payments. |
Non-pension Defined Benefit Postretirement Plan |
Employees who are participant’s in the Company’s Postretirement Healthcare Plan (Healthcare Plan) and who retire from the Company on or after attaining age 55 after completing at least five years of service to the Company are entitled to postretirement healthcare benefits. These financial statements and this Note do not reflect the effects of the 2003 Medicare Act on the Healthcare Plan. |
The components of net periodic benefit cost for the Healthcare Plan are as follows (in thousands): |
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
Service cost | $ | 73 | $ | 75 | $ | 146 | $ | 150 | $ | 73 | $ | 75 | $ | 219 | $ | 225 | ||||||||||||
Interest cost | 116 | 121 | 232 | 242 | 116 | 121 | 348 | 363 | ||||||||||||||||||||
Amortization of net transition obligation | 29 | 29 | 58 | 58 | 29 | 29 | 87 | 87 | ||||||||||||||||||||
Amortization of prior service cost | (5 | ) | (5 | ) | (10 | ) | (10 | ) | (5 | ) | (5 | ) | (15 | ) | (15 | ) | ||||||||||||
Amortization of net loss | 19 | 36 | 38 | 72 | 19 | 36 | 57 | 108 | ||||||||||||||||||||
Net periodic benefit cost | $ | 232 | $ | 256 | $ | 464 | $ | 512 | $ | 232 | $ | 256 | $ | 696 | $ | 768 | ||||||||||||
The Company anticipates that it will need to make contributions to the Plan for the 2005 fiscal year of approximately $0.2 million. The contributions are expected to be in the form of benefits paid. |
89
LEGAL PROCEEDINGS |
The Company is subject to various legal proceedings, claims and litigation as described in Note 10 of the Notes to Consolidated Financial Statements in the Company’s 2004 Annual Report on Form 10-K. There have been no material developments in these proceedings or any new material proceedings that have developed or material proceedings that have terminated during the first |
10
Electric Utility
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30 | September 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2005 | 2004 | 2005 | 2004 | 2005 | 2004 | |||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||
Revenue | $ | 42,261 | $ | 39,809 | $ | 85,408 | $ | 81,456 | $ | 49,274 | $ | 47,921 | $ | 134,682 | $ | 129,377 | ||||||||||||
Operating expenses | 34,141 | 33,249 | 67,793 | 63,488 | 43,811 | 35,415 | 111,603 | 98,902 | ||||||||||||||||||||
Operating income | $ | 8,120 | $ | 6,560 | $ | 17,615 | $ | 17,968 | $ | 5,463 | $ | 12,506 | $ | 23,079 | $ | 30,475 | ||||||||||||
Net income | $ | 3,409 | $ | 1,816 | $ | 7,732 | $ | 6,852 | $ | 1,888 | $ | 5,860 | $ | 9,619 | $ | 12,712 | ||||||||||||
The following tables provide certain operating statistics:
Electric Revenue
(in thousands)
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Percentage | Percentage | |||||||||||||||||||
Customer Base | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Commercial | $ | 11,634 | 6 | % | $ | 10,987 | $ | 23,065 | 4 | % | $ | 22,162 | ||||||||
Residential | 8,649 | 9 | 7,936 | 19,207 | 5 | 18,356 | ||||||||||||||
Industrial | 4,910 | 1 | 4,870 | 9,764 | -- | 9,788 | ||||||||||||||
Municipal sales | 555 | 1 | 549 | 1,048 | 2 | 1,025 | ||||||||||||||
Contract wholesale | 5,672 | 12 | 5,049 | 11,657 | 6 | 10,977 | ||||||||||||||
Wholesale off-system | 9,171 | 5 | 8,697 | 17,284 | 15 | 15,002 | ||||||||||||||
Total electric sales | $ | 40,591 | 7 | % | $ | 38,088 | $ | 82,025 | 6 | % | $ | 77,310 | ||||||||
Other revenue | 1,670 | (3 | ) | 1,721 | 3,383 | (18 | ) | 4,146 | ||||||||||||
Total revenue | $ | 42,261 | 6 | % | $ | 39,809 | $ | 85,408 | 5 | % | $ | 81,456 | ||||||||
9
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Percentage | Percentage | |||||||||||||||||||
Customer Base | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Commercial | $ | 14,127 | 8 | % | $ | 13,117 | $ | 37,179 | 5 | % | $ | 35,258 | ||||||||
Residential | 10,441 | 16 | 9,019 | 29,662 | 8 | 27,396 | ||||||||||||||
Industrial | 5,111 | (1 | ) | 5,175 | 14,874 | (1 | ) | 14,963 | ||||||||||||
Municipal sales | 693 | 7 | 650 | 1,740 | 4 | 1,675 | ||||||||||||||
Contract wholesale | 5,719 | (4 | ) | 5,932 | 17,377 | 3 | 16,909 | |||||||||||||
Wholesale off-system | 11,766 | (7 | ) | 12,590 | 29,050 | 5 | 27,592 | |||||||||||||
Total electric sales | 47,857 | 3 | 46,483 | 129,882 | 5 | 123,793 | ||||||||||||||
Other revenue | 1,417 | (1 | ) | 1,438 | 4,800 | (14 | ) | 5,584 | ||||||||||||
Total revenue | $ | 49,274 | 3 | % | $ | 47,921 | $ | 134,682 | 4 | % | $ | 129,377 | ||||||||
Megawatt Hours
Three Months Ended June 30 | Six Months Ended June 30 | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
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Percentage | Percentage | Percentage | Percentage | |||||||||||||||||||||||||||||||||||||
Customer Base | Customer Base | 2005 | Change | 2004 | 2005 | Change | 2004 | Customer Base | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||||||||||||||
Commercial | 152,644 | 5 | % | 145,802 | 310,162 | 4 | % | 298,407 | 188,481 | 7 | % | 175,935 | 498,643 | 5 | % | 474,342 | ||||||||||||||||||||||||
Residential | 102,692 | 9 | 94,311 | 240,639 | 4 | 232,056 | 122,400 | 17 | 104,468 | 363,039 | 8 | 336,524 | ||||||||||||||||||||||||||||
Industrial | 103,695 | 5 | 98,745 | 202,093 | 2 | 197,266 | 108,445 | (2 | ) | 110,611 | 310,538 | 1 | 307,877 | |||||||||||||||||||||||||||
Municipal sales | 6,827 | 1 | 6,756 | 13,290 | 2 | 13,027 | 9,622 | 9 | 8,799 | 22,912 | 5 | 21,826 | ||||||||||||||||||||||||||||
Contract wholesale | 150,659 | 9 | 138,106 | 311,997 | 4 | 299,695 | 145,993 | (6 | ) | 155,991 | 457,990 | 1 | 455,686 | |||||||||||||||||||||||||||
Wholesale off-system | 212,460 | (6 | ) | 226,099 | 400,074 | 4 | 384,887 | 198,031 | (32 | ) | 291,551 | 598,105 | (12 | ) | 677,237 | |||||||||||||||||||||||||
Total electric sales | 728,977 | 3 | % | 709,819 | 1,478,255 | 4 | % | 1,425,338 | 772,972 | (9 | )% | 847,355 | 2,251,227 | (1 | )% | 2,273,492 | ||||||||||||||||||||||||
We established a new summer peak load of 401 megawatts in July 2005. We established our winter peak load of 344 megawatts in December 1998.
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Three Months Ended | Nine Months Ended | |||||||||||||||||||
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September 30, | September 30, | |||||||||||||||||||
Percentage | Percentage | |||||||||||||||||||
Resources | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Megawatt-hours generated: | ||||||||||||||||||||
Coal | 397,513 | (12 | )% | 452,720 | 1,259,822 | (1 | )% | 1,275,780 | ||||||||||||
Gas | 22,065 | 29 | 17,121 | 27,545 | 8 | 25,551 | ||||||||||||||
419,578 | (11 | ) | 469,841 | 1,287,367 | (1 | ) | 1,301,331 | |||||||||||||
Megawatt-hours purchased | 378,986 | (5 | ) | 400,123 | 1,032,091 | (1 | ) | 1,038,821 | ||||||||||||
Total resources | 798,564 | (8 | )% | 869,964 | 2,319,458 | (1 | )% | 2,340,152 | ||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||
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June 30 | June 30 | |||||||||||||||||||
Percentage | Percentage | |||||||||||||||||||
Resources | 2005 | Change | 2004 | 2005 | Change | 2004 | ||||||||||||||
Megawatt-hours generated: | ||||||||||||||||||||
Coal | 426,400 | 15 | % | 371,500 | 862,300 | 5 | % | 823,100 | ||||||||||||
Gas | 3,830 | (26 | ) | 5,200 | 5,500 | (35 | ) | 8,400 | ||||||||||||
430,230 | 14 | 376,700 | 867,800 | 4 | 831,500 | |||||||||||||||
Megawatt-hours purchased | 331,434 | (8 | ) | 358,592 | 653,105 | 2 | 639,531 | |||||||||||||
Total resources | 761,664 | 4 | % | 735,292 | 1,520,905 | 3 | % | 1,471,031 | ||||||||||||
Three Months Ended | Six Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||
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June 30 | Percentage | June 30 | Percentage | September 30, | Percentage | September 30, | Percentage | |||||||||||||||||||||||||||||||||
2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | 2005 | 2004 | Change | |||||||||||||||||||||||||||||
Heating and cooling degree days | ||||||||||||||||||||||||||||||||||||||||
Actual | ||||||||||||||||||||||||||||||||||||||||
Heating degree days | 933 | 940 | (1 | )% | 3,923 | 4,048 | (3 | )% | 120 | 198 | (39 | )% | 4,043 | 4,246 | (5 | )% | ||||||||||||||||||||||||
Cooling degree days | 148 | 59 | 151 | % | 148 | 59 | 151 | % | 673 | 463 | 45 | % | 821 | 522 | 57 | % | ||||||||||||||||||||||||
Variance from normal | ||||||||||||||||||||||||||||||||||||||||
Heating degree days | (6 | )% | (6 | )% | -- | (9 | )% | (6 | )% | -- | (47 | )% | (13 | )% | -- | (11 | )% | (6 | )% | -- | ||||||||||||||||||||
Cooling degree days | 47 | % | (42 | )% | -- | 47 | % | (42 | )% | -- | 36 | % | (6 | )% | -- | 38 | % | (12 | )% | -- |
Three Months Ended JuneSeptember 30, 2005 Compared to Three Months Ended JuneSeptember 30, 2004. Electric utility revenues increased 63 percent for the three month period ended JuneSeptember 30, 2005, compared to the same period in the prior year. Firm commercial residential, industrial and contract wholesaleresidential sales increased 6 percent, 9 percent, 18 percent and 1216 percent, respectively. Wholesale off-system sales increased 5 percent with a 12 percent increase in average price received, partially offset by a 6 percent decrease in megawatt-hours sold. Cooling degree days, which is a measure of weather trends, were 15145 percent higher than the same period in the prior year. Wholesale off-system sales decreased 7 percent with a 32 percent decrease in megawatt-hours sold, partially offset by a 38 percent increase in average price received. The decrease in wholesale off-system megawatt-hours sold was primarily due to the unscheduled outage of our Neil Simpson II power plant in July and August of 2005, which resulted in fewer megawatt-hours being available for sale.
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Electric operating expenses increased 324 percent for the three month period ended JuneSeptember 30, 2005, compared to the same period in the prior year. Higher operating expenses were primarily the result of a $0.6$5.3 million increase in fuel and purchased power costs. The increase in fuel and purchased power was due to a $0.4$4.8 million increase in purchased power, resulting fromwhich includes $2.8 million of additional purchase power costs to cover the outage of NSII, as well as a 1240 percent increase in average price per megawatt-hour, partially offset by an 8a 5 percent decrease in megawatt-hours purchased, and a $0.2 million increase in fuelpurchased. Fuel costs increased due to a 1426 percent increase in megawatt-hours generatedaverage cost partially offset by a 7an 11 percent decrease in average cost.megawatt-hours generated. Megawatt-hours produced through coal-fired generation increaseddecreased while higher cost gas generation was utilized in the three months ended JuneSeptember 30, 2005, as we incurred scheduled2005. Purchased power and gas generation were utilized for firm load demand and peaking needs due to unscheduled plant outages during the second quarter of 2004. Prevailing gas prices have made it more economical for us to purchase power for our peaking needs, rather than generate energy from our gas turbines.and warmer weather. The increase in operating expense was also affected by increased power marketing legal expense, and compensation costs partially offset by lower maintenance costs.and corporate allocations.
Income from continuing operations increased $1.6Net income decreased $4.0 million primarily due to increased revenues, lower maintenance costs and lower interest expense, due to the pay down of debt, partially offset by increased fuel and purchased power costs, legal expense, compensation costs and compensation costs.corporate allocations, partially offset by increased revenues and lower interest expense, due to the paydown of debt.
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SixNine Months Ended JuneSeptember 30, 2005 Compared to SixNine Months Ended JuneSeptember 30, 2004. Electric utility revenues increased 54 percent for the sixnine month period ended JuneSeptember 30, 2005 compared to the same period in the prior year. Firm commercial, residential and contract wholesale sales increased 4 percent, 5 percent, 8 percent and 63 percent, respectively. Wholesale off-system sales increased 15 percent due to an 11 percent increase in average price received and a 4 percent increase in megawatt-hours sold. Cooling degree days for the sixnine month period were 15157 percent higher than the same period in 2004 and heating degree days were 35 percent lower than the same period in 2004. Wholesale off-system sales increased 5 percent due to a 19 percent increase in average price received partially offset by a 12 percent decrease in megawatt-hours sold.
Electric operating expenses increased 713 percent for the sixnine month period ended JuneSeptember 30, 2005, compared to the same period in the prior year. Higher operating expenses were primarily the result of a $3.0an $8.4 million increase in fuel and purchased power costs. The increase in fuel and purchased power was due to a $3.1an $8.0 million increase in purchased power, resulting fromwhich includes $2.8 million of additional purchase power costs to cover the outage of NSII, as well as a 1223 percent increase in average price per megawatt-hour, and a 3 percent increase in megawatt-hours purchased,partially offset by a nominal1 percent decrease in fuelmegawatt-hours purchased. Fuel costs increased $0.4 million due to a 65 percent decreaseincrease in average cost, partially offset by a 41 percent increasedecrease in megawatt-hours generated. Megawatt-hours produced through coal-fired generation increaseddecreased while higher cost gas generation was utilized in the sixnine months ended JuneSeptember 30, 2005, as we incurred scheduled2005. Purchased power and gas generation were utilized for firm load demand and peaking needs due to unscheduled plant outages during the second quarter of 2004. Prevailing gas prices have made it more economical for us to purchase power for our peaking needs and increased off-system sales, rather than generate energy from our gas turbines.warmer weather. The increase in operating expense was also affected by increased power marketing legal expense, and compensation costs and corporate allocations, partially offset by lower maintenance costs.
Income from continuing operations increased $0.9Net income decreased $3.1 million primarily due to increased fuel and purchased power costs, legal expense, compensation costs and corporate allocations, partially offset by increased revenues, lower maintenance costs and lower interest expense, due to the pay down of debt, partially offset by increased fuel and purchased power costs, legal expense and compensation costs.debt.
In July 2005, the electric utility experienced an unscheduled outage at its 90 megawatt Neil Simpson II power plant. That plant is expected to be out of service for the month of August. To meet our forecasted needs, we have obtained supplemental purchased power and additional natural gas supplies, which will negatively affect third quarter 2005 financial results. The economic impact of this outage is expected to be in the range of $2.5 million to $3.0 million pre-tax, taking into account increased fuel costs, higher purchased power expenses and reduced coal sales.
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This Quarterly Report on Form 10-Q includes “forward-looking statements” as defined by the Securities and Exchange Commission, or SEC. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. These forward-looking statements are based on assumptions which we believe are reasonable based on current expectations and projections about future events and industry conditions and trends affecting our business. However, whether actual results and developments will conform to our expectations and predictions is subject to a number of risks and uncertainties that, among other things, could cause actual results to differ materially from those contained in the forward-looking statements, including the risk factors described in Items 1 and 2 of our 2004 Annual Report on Form 10-K filed with the SEC, and the following:
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New factors that could cause actual results to differ materially from those described in forward-looking statements emerge from time to time, and it is not possible for us to predict all such factors, or the extent to which any such factor or combination of factors may cause actual results to differ from those contained in any forward-looking statement. We assume no obligation to update publicly any such forward-looking statements, whether as a result of new information, future events, or otherwise.
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Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act)) as of JuneSeptember 30, 2005. Based on their evaluation, they have concluded that our disclosure controls and procedures are adequate and effective to ensure that material information relating to us that is required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the required time periods.
During the period covered by this Quarterly Report on Form 10-Q, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
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BLACK HILLS POWER, INC.
Part II – Other Information
Item 1. | Legal Proceedings |
For information regarding legal proceedings, see Note 10 of Notes to Consolidated Financial Statements in Item 8 of the Company’s 2004 Annual Report on Form 10-K and Note |
Item 6. | Exhibits |
(a) Exhibits- |
Exhibit 31.1 Certification pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 31.2 Certification pursuant to Rule 13a - 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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BLACK HILLS POWER, INC.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
BLACK HILLS POWER, INC. |
/s/ David R. Emery David R. Emery, Chairman, President and Chief Executive Officer |
/s/ Mark T. Thies Mark T. Thies, Executive Vice President and Chief Financial Officer |
Dated: August 15,November 14, 2005
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EXHIBIT INDEX
Exhibit Number | Description |
Exhibit 31.1 | Certification pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes – Oxley Act of 2002. |
Exhibit 31.2 | Certification pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes – Oxley Act of 2002. |
Exhibit 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
Exhibit 32.2 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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